Foreign exchange company
A non-bank foreign exchange company also known as foreign exchange broker or simply forex broker is a company that offers currency exchange and international payments to private individuals and companies. The term is typically used for currency exchange companies that offer physical delivery rather than speculative trading. i.e., there is a physical delivery of currency to a bank account.
Foreign exchange companies are normally distinct from money transfer companies or remittance companies and bureaux de change as they typically perform high-value transfers unlike their money transfer counterparts that focus on high-volume low-value transfers generally by economic migrants back to their home country or to provide cash for travelers. Transactions can be either spot transactions or forward transactions.
United Kingdom
It is estimated that in the UK, 14% of currency transfers/payments are made via non-bank Foreign Exchange Companies. These companies’ selling point is usually that they will offer better exchange rates or cheaper payments than the customer’s bank. UK forex brokers are not covered under the Financial Services Compensation Scheme. The 10 largest companies in the UK by net profit as at August 2012.
| No. | Company | Accounting Date | Pre Tax Net Profit |
|---|---|---|---|
| 1 | Western Union Business Solutions (formerly Travelex) | 31 December 2010 | £11,048,000 |
| 2 | Moneycorp | 31 August 2011 | £7,660,000 |
| 3 | World First UK Ltd | 31 January 2012 | £4,494,000 |
| 4 | HiFX | 30 June 2011 | £4,486,000 |
| 5 | Currencies Direct Ltd | 30 June 2011 | £4,471,000 |
| 6 | Schneider (renamed Monex Europe Limited) | 31 March 2012 | £3,500,278 |
| 7 | OPT | 09 Feb 2014 | £3,387,157 |
| 8 | Foreign Currency Direct | 31 October 2011 | £1,687,364 |
| 9 | AFEX | 31 December 2011 | £1,583,459 |
| 10 | Global Reach Partners/Corporate FX | 31 December 2011 | £1,289,000 |
Broker
A broker is an individual person that arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Distinguish agent—one who acts on behalf of a principal.
Definition
A broker is an independent agent used extensively in some industries. A broker’s prime responsibility is to bring sellers and buyers together and thus a broker is the third-person facilitator between a buyer and a seller. An example would be a real estate broker who facilitates the sale of a property.
Brokers also can furnish market information regarding prices, products, and market conditions. Brokers may represent either the seller (90% of the time) or the buyer (10%) but not both at the same time. An example would be a stockbroker, who makes the sale or purchase of securities on behalf of his client. Brokers play a huge role in the sale of stocks, bonds, and other financial services.
There are advantages to using a broker. First, they know their market and have already established relations with prospective accounts. Brokers have the tools and resources to reach the largest possible base of buyers. They then screen these potential buyers for revenue that would support the potential acquisition. An individual producer, on the other hand, especially one new in the market, probably will not have the same access to customers as a broker. Another benefit of using a broker is cost—they might be cheaper in smaller markets, with smaller accounts, or with a limited line of products.
Before hiring a broker, it may be considered prudent to research the requirements relating to someone using the title. Some titles, such as real estate brokers, often have strict state requirements for using the term, while others, such as aircraft brokers, typically have no formal licensing or training requirements.
FX BUSINESS 